BILL ANALYSIS



C.S.H.B. 3164
By: Seidlits
05-06-95
Committee Report (Substituted)


BACKGROUND

The Public Utility Commission of Texas (PUC) was created in 1975
and is responsible for regulating electric and telephone utilities
in Texas.  The key functions of PUC include certifying a utility's
initial operation, reviewing any new construction or changes to
existing facilities, setting rates, and monitoring and auditing the
operations of utilities under its jurisdiction.  Currently, PUC has
oversight of investor-owned utilities, electric cooperatives, river
authorities, and local telephone companies.  Cities have retained
original ratemaking authority for electric utilities and
cooperatives operating within their boundaries, but the commission
reviews these rates on an appellate basis.  The commission also
reviews on appeal the rates of city utilities serving customers
outside of their city limits.  

The Office of Public Utility Counsel (OPUC) was created in 1983 to
represent residential and small business consumers before PUC. 
OPUC participates in many proceedings before PUC but concentrates
its efforts on telephone and electric utility rate cases having the
greatest impact on residential and small business consumers.  OPUC
has participated in major rate cases, but only a percentage of all
cases before PUC since 1983.  

The PUC and OPUC are subject to the sunset act and will be
abolished September 1, 1995 unless continued by the Legislature.

PURPOSE

The purpose of this bill is to continue the Public Utility
Commission of Texas and the Office of Public Utility Counsel for a
ten-year period and make statutory modifications.  The
modifications proposed by this bill:

     -     apply standard language developed by the Sunset
           Commission to the statute relating to the PUC and OPUC;

     -     provide the PUC with administrative penalty authority;

     -     transfer the administrative hearings from the PUC to the
           State Office of Administrative Hearings; and

     -     provide for other changes.

RULEMAKING AUTHORITY

In the committee's opinion, this bill grants rulemaking authority
to the Public Utility Commission in the following sections: 
SECTION 9 - Section 1.026, Public Utility Regulatory Act of 1995,
as enacted by S.B. 319, Acts of the 74th Legislature, Regular
Session, 1995; SECTION 10 - Section 1.028; SECTION 11 - Section
1.029; SECTION 12 - Section 1.031; SECTION 14 - Section 1.036;
SECTION 18 - Section 1.0513; SECTION 20 - Section 1.053; SECTION 21
- Section 1.101; SECTION 23 - Section 1.104; SECTION 31 - Section
2003.047, Government Code.  In addition, under the general
rulemaking authority already granted to the Public Utility
Commission, rules may also be developed to implement other
provisions found in this bill.

SECTION BY SECTION ANALYSIS

     SECTION 1.  Amends Section 1.003, Public Utility Regulatory
Act of 1995, as enacted by S.B. 319, Acts of the 74th Legislature,
Regular Session, 1995 by adding Subdivision (18).  Defines "trade
association" for purposes of standard language developed by the
Sunset Commission regarding conflicts of interest.

     SECTION 2.  Amends Section 1.005.  Applies standard language
developed by the Sunset Commission making the commission subject to
the open meetings law.

     SECTION 3.  Amends Subtitle A, Title I, by adding Section
1.006.  Specifies persons affected in a manner other than by
setting of rates for purposes of conflict of interest requirements
if $10,000 or ten percent of their business is the providing of
fuel or utility-related products or services to a regulated or
unregulated provider of telecommunications or electric services or
an affiliate.

     SECTION 4.  Amends Sections 1.021(c) and (d).  Applies
standard language developed by the Sunset Commission for the
governor to appoint the presiding officer of the commission.  Also
updates standard Sunset language regarding non-discriminatory
appointments to commission.

     SECTION 5.  Amends Section 1.022.  Updates the sunset review
date for the Public Utility Commission and Office of Public Utility
Commission to 2001 which provides for a six-year review.

     SECTION 6.  Amends Section 1.023.  (a) Removes age requirement
for commission membership and updates standard Sunset language
regarding public membership on the commission.

     (b)  Removes requirement for commission members to post a
bond.          

     (c)  Specifies that conflict of interest provisions apply to
direct competitors of utilities.

     (d)  Updates standard language developed by the Sunset
Commission prohibiting lobbyists from serving on the commission or
as the public utility counsel or as general counsel to the
commission.

     (e)  Applies standard language developed by the Sunset
Commission prohibiting conflicts of interest for commission members
and expands it to apply to the executive director and general
counsel; persons connected with companies supplying fuel or
utility-related products or services to regulated or unregulated
utilities; persons with more than a ten percent or $10,000 interest
in a related business or other affected entity; persons receiving
funds from the commission; and persons with an interest in a mutual
or retirement fund with more than ten percent of its holdings in a
utility or utility competitor or supplier.

     (f)  Provides for persons otherwise ineligible to serve
because of interest in a related business or other affected entity
to serve if they notify the attorney general and commission of the
reason for ineligibility and divest ownership or control.

     (g)-(h) Applies standard language developed by the Sunset
Commissions prohibiting certain trade association representatives
or their spouses from serving on the commission or being employed
at a salary group 17 or above. 

     SECTION 7.  Amends Section 1.024.  Adds reference to utility
competitors to existing provisions regarding prohibited conduct by
commission members and employees.

     SECTION 8.  Amends Section 1.025.  Expands existing revolving
door provisions to include employees of the State Office of
Administrative Hearings (SOAH) involved in hearing utility cases. 
Updates standard language developed by the Sunset Commission
regarding standards of conduct for commission employees.

     SECTION 9.  Amends Section 1.026.  Updates standard language
developed by the Sunset Commission regarding grounds for removal of
commissioners.  Requires the executive director to notify the
governor and attorney general of any potential ground for removal
of a commission member.  Applies standard language developed by the
Sunset Commission regarding training requirements for
commissioners.

     SECTION 10.  Amends Section 1.028.  Deletes language regarding
required staffing and organization of the agency.  Applies standard
language developed by the Sunset Commission regarding separation of
commission and staff functions.

     SECTION 11.  Amends Section 1.029.  Updates standard language
developed by the Sunset Commission regarding the development of an
intra-agency career ladder.  Updates standard language developed by
the Sunset Commission regarding employee performance evaluations. 
Updates standard language developed by the Sunset Commission
regarding an agency equal employment policy that is annually
updated, reviewed by the Texas Commission on Human Rights, and
filed with the governor's office.

     SECTION 12.  Amends Section 1.031.  Applies standard language
developed by the Sunset Commission regarding opportunity for public
input before the commission.

     SECTION 13.  Amends Section 1.035(a).  Updates standard
language developed by the Sunset Commission.  Requires the
commission to prepare an annual financial report that meets the
reporting requirements in the appropriations act.      

     SECTION 14.  Amends Section 1.036.  Updates standard language
developed by the Sunset Commission regarding notice of complaint
procedures.  Applies standard language developed by the Sunset
Commission requiring the commission to comply with laws relating to
program and facility accessibility and requiring the commission to
develop a plan for non-English speaking persons to have access to
the commission's programs.

     SECTION 15.   Amends Section 1.051.  (b) Applies standard
language developed by the Sunset Commission regarding non-discriminatory appointments to the position of public utility
counsel.

     (d)  Applies standard language developed by the Sunset
Commission prohibiting conflicts of interest for the public utility
counsel and expands it to include persons connected with
unregulated utilities and other affected entities; persons with
more than a ten percent or $10,000 interest in a related business
or other affected entity; persons receiving funds from the
commission; and persons with an interest in a mutual or retirement
fund with more than ten percent of its holdings in utility or a
utility competitor or supplier.

     (e)  Updates standard language developed by the Sunset
Commission prohibiting lobbyists from serving as the public utility
counsel or general counsel for the office.

     (f)  Applies standard language developed by the Sunset
Commissions prohibiting trade association representatives or their
spouses from serving as the public utility counsel or being
employed at a salary group 17 or above. 

     (g)  Provides for persons otherwise ineligible to serve as the
public utility counsel because of interest in a related business or
other affected entity to serve if they notify the attorney general
and the commission of the reason for ineligibility and divest
ownership or control.

     SECTION 16.  Amends Subtitle C, Title I, by adding Section
1.0511.  Applies standard language developed by the Sunset
Commission regarding grounds for removal of the public utility
counsel.  Affirms that an action of the office is valid even if it
is taken when a ground for removal of the public counsel exists.

     SECTION 17.  Amends Subtitle C, Title I, by adding Section
1.0512.  Applies two-year revolving door provision to the public
utility counsel and one-year revolving door for office employees
for employment with a public utility or for representation in a
matter in which the person was personally involved or responsible. 
Prohibits the counsellor and employees from representing clients
before the commission in matters in which they were personally
involved while they were with the office.

     SECTION 18.  Amends Subtitle C, Title I, by adding Section
1.0513.  Updates standard language developed by the Sunset
Commission that requires the office to prepare an annual financial
report that meets the reporting requirements in the appropriations
act.  Applies standard language developed by the Sunset Commission
regarding information about office's functions.    Applies standard
language developed by the Sunset Commission requiring the office to
comply with laws relating to program and facility accessibility and
requiring the office to develop a plan for non-English speaking
persons to have access to the commission's programs.

     SECTION 19.  Amends Section 1.052.  Prohibits the public
utility counsel from having an interest in a utility competitor,
supplier, or other affected entity for two years following
termination of employment.

     SECTION 20.  Amends Section 1.053.  Applies standard language
developed by the Sunset Commission regarding the development of an
intra-agency career ladder, employee performance evaluations, a
merit pay system, notice to employees of standards of conduct, and
an equal employment policy statement.

     SECTION 21.  Amends Section 1.101.  Specifies that the
commission's rulemaking authority extends to practice before the
SOAH.  Requires the commission to adopt rules to allow
administrative law judges to limit the length of cases, limit
discovery, identify issues and facts subject to discovery, and
group parties (other than OPUC) to facilitate cross examination. 
Specifies that hearings not conducted by one or more commissioners
must be heard by SOAH and authorizes the commission to delegate
matters to the utility division of SOAH.

     SECTION 22.  Amends Section 1.102(b).  Deletes the requirement
for the commission to audit each utility at least once every ten
years.

     SECTION 23.  Amends Subtitle D, Title I, by adding Section
1.104.  Requires the commission to adopt rules governing
settlements to resolve contested cases, while maintaining each
party's right to hearing before the commission and judicial review
of issues that remain in dispute.

     SECTION 24.  Amends Section 1.202  Deletes provision for the
railroad commission to review and approve gas utilities'
applications to purchase natural gas from producing affiliates. 
Reletters sections.

     SECTION 25.  Amends Section 1.251(b).  Adds language requiring
the PUC to consider whether a proposed utility sale will adversely
affect the health and safety of customers or employees, will result
in loss of Texas jobs or a decline in service, and whether the
utility will recoup its investment and whether the transaction is
in the public interest.

     SECTION 26.  Amends Subtitle I, Title I, by adding Section
1.3215.  Authorizes PUC to impose administrative penalties up to
$5,000 for violations of the Act or a PUC rule or order. 
Establishes criteria for determining the amount of penalties and 
procedures for assessing penalties.  Specifies that a penalty will
not be imposed on accidental or inadvertent violations or other
violations that have been corrected or is corrected no later than
30 days after receipt of a notice of violation.  Specifies that
persons who may be assessed a penalty have the burden of proving
that the violation has been corrected and that the violation was
accidental or inadvertent.  Specifies that penalty amounts are
deposited into general revenue and authorizes the executive
director to delegate powers or duties under this section.

     SECTION 27.  Amends Section 1.351(b).  Shifts authority from
the commission to the legislature for adjusting utility gross
receipts assessment.

     SECTION 28.  Amends Section 1.354.  Removes language for the
commission to notify comptroller of adjustment of assessment. 
Applies standard language developed by the Sunset Commission that
requires the commission's and the office's funds to be managed in
accordance with the State Funds Reforms Act.

     SECTION 29.  Amends Subtitle J, Title I by adding Section
1.357.  Adds language authorizing the commission to receive and
spend federal funds from grants or other forms of financial
assistance and exempts special accounts established under this
section from funds consolidation.

     SECTION 30.  Amends Section 1.401.  Updates standard Sunset
provision requiring the PUC to keep specified information, but not
a file, about each complaint it receives and requires PUC to keep
file about each written complaint.  Requires PUC to provide
information about its policies and procedures regarding complaint
investigation and resolution.

     SECTION 31.  Amends Subchapter C, Chapter 2003, Government
Code, by adding Section 2003.047.  (a) Requires SOAH to establish
a utility division to perform contested case hearings for the
commission.

     (b)  Requires the division to hear cases not conducted by one
or more commissioners. 

     (c) Specifies that only the utility division may hear cases
for the commission.

     (d) Specifies that administrative law judges must be licensed
attorneys with at least five years general experience or three
years experience in utility regulatory law.

     (e) Establishes the process for the commission to identify
issues for the administrative law judge to address.

     (f) Requires joint rules between the commission and SOAH to
provide for certifying to the commission of issues it is required
by law to determine.

     (g)  Allows the commission to change finding of fact or
conclusion of law or to vacate or modify an order issued by an
administrative law judge if it determines that the administrative
law judge did not properly apply or interpret applicable law,
commission rules or policies, or prior administrative decisions;
the administrative law judge issued a finding of fact not supported
by preponderance of evidence; or commission policy or prior
administrative decision on which the administrative law judge
relied is incorrect or should be changed.

     (h) Requires the commission to state in writing specific
reason and legal basis for changing finding or conclusion.

     (i) Authorizes the administrative law judge to impose
sanctions against parties in contested cases for specified actions.

     (j) Specifies sanctions including limiting discovery, charging
expenses of discovery, and punishing offending party to same extent
as a district court.

     (k) Requires hearings conducted by SOAH for the commission to
be held in hearing rooms provided by the commission and requires
the commission to provide the utility division access to its
computer systems, databases, and library resources.

     (l) Specifies that SOAH is to charge the commission a fixed
annual fee, negotiated biennially and subject to the governor's
approval, rather than an hourly rate for services provided by the
utility division.

     SECTION 32.  Establishes a task force to oversee the transfer
of the hearings division from the commission to SOAH.

     SECTION 33.  Specifies transfer of existing hearings personnel
and equipment, excluding central records on September 1, 1995 and
provides employment protections for one year thereafter.  Specifies
other implementation provisions relating to the transfer of the
hearings division..

     SECTION 34.  Specifies that provisions related to
administrative penalties apply only to violations occurring on or
after the effective date of the act.

     SECTION 35.  Specifies that settlement process applies only
proceedings in which a final order has not been issued before the
effective date of this Act and does not apply to an electric
utility merger proceeding filed before January 1, 1995 in which a
final order has not been issued.

     SECTION 36.  Specifies that standard Sunset language regarding
requirements for membership on the commission or employment as
executive director or general counsel applies only to persons
appointed or hired on or after the effective date.

     SECTION 37.  Specifies the effective date of the Act as
September 1, 1995.  

     SECTION 38.  Emergency clause.

COMPARISON OF ORIGINAL TO SUBSTITUTE

1.   Deletes a provision contained in the original version amending
     the legislative policy  and purpose that recognized that
     wholesale electric service is becoming more competitive.  

2.   Deletes provisions contained in the original version
     redefining "rate" to specify that rates allowed by flexible
     pricing not be considered rates and redefining "service" to
     prohibit the resale of electricity, except for voluntary
     transmission wheeling services that are not regulated by the
     Federal Energy Regulatory Commission.

3.   Deletes the provisions contained in the original version that
     would have expanded the revolving door policy to apply to
     utility affiliates and utility competitors, suppliers or other
     affected entities.  

4.   Deletes the provision contained in the original version that
     would have limited the commission's authority to require
     reports on utility-affiliate transactions to the extent that
     the transactions are subject to the commission's jurisdiction.

5.   Adds a provision not contained in the original version to
     require the PUC to consider several factors in determining
     whether a proposed utility sale is in the public interest.

6.   Adds a provision not contained in the original version
     providing the PUC with authority to assess administrative
     penalties under certain circumstances against persons
     violating the Act or a PUC rule or order.

7.   Adds a provision not contained in the original version
     allowing the PUC to receive and spend federal funds.

8.   Adds language not contained in the original version requiring
     hearings conducted by SOAH for the commission to be held in
     hearing rooms provided by the commission and requiring the
     commission to provide the utility division access to its
     computer systems, databases, and library resources.

9.   Adds language not contained in the original version specifying
     that SOAH is to charge the commission a fixed annual fee,
     negotiated biennially, rather than an hourly rate for services
     provided by the utility division.

10.  Provides the transfer of the PUC hearing division to occur on
     September 1, 1995, instead of September 1, 1996 as specified
     in the original version.

11.  Deletes a provision contained in the original version that
     would have repealed a civil penalty provision for violations
     of the Act under the jurisdiction of the Railroad Commission
     that result in pollution.

12.  Deletes provisions contained in the original version
     redefining "electric utility" or "utility" to recognize Exempt
     Wholesale Generators and Power Marketers and defining
     "integrated resource planning," "lowest reasonable system
     cost," and "qualifying facility."

13.  Deletes a provision contained in the original version
     specifying the legislative policy concerning regulation of the
     electric utility industry. 

14.  Deletes a provision contained in the original version
     providing for and specifying an integrated resource planning
     process.   

15.  Deletes a provision contained in the original version
     providing for flexible pricing by an electric utility.  

16.  Deletes a provision contained in the original version
     providing for partial rate deregulation of electric
     distribution cooperatives. 

17.  Deletes a provision contained in the original version
     providing for a utility to include payments to affiliated
     interests in charges to consumers without findings of
     reasonableness and necessity as long as there is a mechanism
     to refund the charges if the findings are made.

18.  Deletes a provision contained in the original version that
     amends the exclusive original jurisdiction of municipalities.

SUMMARY OF COMMITTEE ACTION

Pursuant to public notice posted on April 5, 1995, HB 3164 was
considered by the Committee on State Affairs in a public hearing on
April 10, 1995.  The Chair laid out HB 3164 and explained the bill. 
The following person testified for the bill: Robert Reilly
representing New Electric Wholesalers of Texas.  The following
persons testified against the bill:  Larry Francis representing
himself; Nanette Williams representing herself; Charles S. Groff
representing himself; Mark Shilling representing himself; Joe D.
Gunn representing Workers; Jim Boyle representing IBEW; Stephanie
Kroger representing Texas Industrial Energy Consumers; Mark
Leypoldt representing himself; Peggy Venable representing Texas
Citizens for a Sound Economy; Frank D. Griffin representing Goose
Creek Consolidated Ind. School District; Jim Marston representing
himself; Janee Briesemeister representing Consumers Union; Jay
Doegy representing City of Arlington; Burl Buchanan representing
himself; Mary Rhodes representing herself.  The following persons
testified neutrally on the bill:  Marianne Carroll representing
Newtex; Jim Morriss representing Texas Electric Cooperatives, Inc.;
Tom Standish representing the Association of Electric Companies of
Texas; Kent Caperton representing the Association of Electric
Companies of Texas; Mike Williams representing himself; Mike Ozymy
representing the Association of Electric Companies of Texas; and
Mark Mosely representing the Association of Electric Companies of
Texas.  The Chair closed on HB 3164.  The Chair referred HB 3164 to
a subcommittee consisting of the following members: Seidlits,
Chair; Black; Bosse; Carter; Danburg; D. Jones; S. Turner.  After
being recalled directly from subcommittee, the committee considered
HB 3164 in a formal meeting on May 5, 1995.  The Chair laid out HB
3164.  The committee considered a complete substitute for the bill. 
The substitute was adopted without objection.  The bill was
reported favorably as substituted with the recommendation that it
do pass and be printed, by a record vote of 13 ayes, 0 nay, 1 pnv,
1 absent.